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Exam 1: An Introduction to Taxation and Understanding the Federal Law

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Question 51

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Match the statements that relate to each other.Note: Some choices may be used more than once. a.3 years from date return is filed b.3 years from due date of return c.20% of underpayment d.5% per month (25% limit) e.0.5% per month (25% limit) f.Conducted at IRS office g.Conducted at taxpayer's office h.6 years i.45-day grace period allowed to IRS j.No statute of limitations (period remains open) k.75% of underpayment l.No correct match provided -Late filing and statute limitations (deficiency situations)

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Question 52

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Social considerations can be used to justify:

A) Allowance of a credit for child care expenses.
B) Allowing excess capital losses to be carried over to other years.
C) Allowing accelerated amortization for the cost of installing pollution control facilities.
D) Allowing a Federal income tax deduction for state and local sales taxes.
E) None of these.

F) A) and B)
G) D) and E)

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Question 53

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An inheritance tax is a tax on a decedent's right to pass property at death.

When interest is charged on a deficiency,any part of a month counts as a full month.

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Revenue neutrality

For the tax year 2016,Noah reported gross income of $300,000 on his timely filed Federal income tax return. a.Presuming the general rule applies,when does the statute of limitations on assessments normally expire? b.Suppose Noah inadvertently omitted gross income of $76,000.When does the statute of limitations on assessments expire? c.Suppose the omission was deliberate and not inadvertent.When does the statute of limitations on assessments expire?

A characteristic of FICA is that:

Under what conditions is it permissible,from an ethical standpoint,for a CPA firm to outsource tax return preparation to a third party?

Property can be transferred within the family group by gift or at death.One motivation for preferring the gift approach is:

Which,if any,of the following statements best describes the history of the Federal income tax?

Because the law is complicated,most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

Logan dies with an estate worth $20 million.Under his will,$10 million passes to his wife while $10 million goes to his church.What is Logan's Federal estate tax result?

A VAT (value added tax) :

Under state amnesty programs,all delinquent and unpaid income taxes are forgiven.

The civil fraud penalty can entail large fines and possible incarceration.

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

The objective of pay-as-you-go (paygo)is to achieve revenue neutrality.

Mona inherits her mother's personal residence,which she converts to a furnished rental house.These changes should affect the amount of ad valorem property taxes levied on the properties.

Several years ago,Logan purchased extra grazing land for his ranch at a cost of $240,000.In 2016,the land is condemned by the state for development as a highway maintenance depot.Under the condemnation award,Logan receives $600,000 for the land.Within the same year,he replaces the property with other grazing land.What is Logan's tax situation if the replacement land cost: a.$210,000? b.$360,000? c.$630,000? d.Why?